In order to show the market
value of the improvements, Mr. Grabbe purports to have “abstracted” the fair
market value of the land from his purchase price. The Petitioner first removed
the $11,240 assessed value of the one-acre building site from the amount of the
purchase allocated to the 3.664 acre parcel. Petitioner Exhibit 4SN. Similarly,
he subtracted the $3,890 assessed value for the one-acre building site from the
amount of the purchase price allocated to the 19.266 acre parcel. Petitioner
Exhibit 4SF. Then, to calculate the value of the remaining 2.664 acres of
the 3.664 acre parcel and the value of the remaining 18.266 acres of the 19.266
acre parcel, Mr. Grabbe relied on the purchase of a contiguous property.
According to Mr. Grabbe, Ceres Farms, LLC, purchased approximately 200 acres in
Carroll County for $1,647,513, or $8,216 an acre, in February 2009. Petitioner
Exhibit 17S. However, the sales disclosure forms that Mr. Grabbe submitted
indicate Ceres Farms purchased six parcels of land for $2.8 million. Id. According
to a hand-written notation, two of the six parcels are located in Clinton
County. Id. In addition, the sales disclosure form shows the typed $2.8
million sale price struck out by pen and “1,647,513” (no dollar sign) written
beside the figure by hand. While it is possible the handwritten notation of
“1,647,513” was an allocation of that sale price to the four parcels in Carroll
County, it is not clear on the record. Even if the Board assumed that the
handwritten “1,647,513” was intended to be an allocation of the sale price to
the four Carroll County parcels, there is no evidence showing the basis for
that allocation. In fact, there is no evidence of who made the handwritten
notation or when the “allocation” was made. More importantly, the Petitioner
supplied the sales disclosure forms for only two of the four parcels in
Carroll County. Id. There is no information as to the size of the other
parcels included in the purchase. Thus, Mr. Grabbe’s contention that
agricultural land is worth $8,216 based on Ceres Farms’ purchase of farmland is
unsupported by the evidence. And Mr. Grabbe’s use of $5,300 an acre is
completely without support in the record. While Mr. Grabbe provided some
evidence that agricultural land is assessed below its market value-in-use, Mr.
Grabbe’s evidence fails to sufficiently show the land’s actual value. Without
probative evidence of the value of his land, Mr. Grabbe’s attempt to “abstract”
the value of the properties’ improvements from his purchase price fails to
raise a prima facie case that his hog barns are over-valued.
The Petitioner also contends
his properties are over-assessed based on an income approach to value.
According to Mr. Grabbe, he used the properties’ actual rent of $90,000 and
deducted depreciation, an estimated amount for repairs, and the actual cost of
insurance and real estate taxes, resulting in a net operating income of
$42,442. The Petitioner then applied a 20% capitalization rate to the
properties’ net income, added in $15,000 for the extra farm land and deducted
$36,579 for personal property from the calculation, resulting in an estimated
value of $191,401… Here Mr. Grabbe used site-specific income and expense
information, but he provided no evidence to demonstrate that the properties’ income
or expenses were typical for comparable properties in the market. Thus, any low
rent or high expense levels may be attributed to the Petitioner’s management of
the property as opposed to the property’s market value. See Lake County
Trust Co. No. 1163 v. State Board of Tax Commissioners, 694 N.E.2d 1253,
1257-58 (Ind. Tax Ct. 1998) (economic obsolescence was not warranted where
taxpayer executed unfavorable leases resulting in a failure to realize as much
net income from the subject property).
Additionally, the Petitioner
failed to adequately support his capitalization rate. A capitalization rate
“reflects the annual rate of return necessary to attract investment capital and
is influenced by such factors as apparent risk, market attitudes toward future
inflation, the prospective rates of return for alternative investments, the
rates of return earned by comparable properties in the past, the supply of and
demand for mortgage funds, and the availability of tax shelters.” See
Hometowne Associates, L.P. v. Maley, 839 N.E.2d 269, 275 (Ind. Tax Ct.
2005). Here the Petitioner based his capitalization rate on the rate used in an
appraisal of a different – and more importantly an unidentified –
property by an appraiser without even submitting the entire appraisal for the
Board’s review. While the rules of evidence generally do not apply in
the Board’s hearings, the Board requires some evidence of the accuracy and
credibility of the evidence. Whitley Products, Inc. v. State Board of Tax
Commissioners, 704 N.E.2d 1113, 1119 (Ind. Tax Ct. 1998); and Herb v.
State Board of Tax Commissioners, 656 N.E.2d 890, 893 (Ind. Tax Ct. 1995).
Mr. Grabbe’s assurance that the unidentified appraised property was
“comparable” to the properties under appeal falls well below the standard of
proof required in a property tax appeal. See Long v. Wayne Twp. Assessor, 821
N.E.2d 466, 469 (Ind. Tax Ct. 2005) (conclusory statements that a property is
“similar” or “comparable” to another property do not constitute probative
evidence of the comparability of the two properties). Thus, the Board
concludes that the Petitioner’s income analysis fails to raise a prima facie
case that the subject properties’ assessed values should be reduced.
The Petitioner also argues that
his properties are over-valued based on a cost approach analysis. Grabbe
testimony. In his analysis, Mr. Grabbe testified that he used the county’s
reproduction cost. Id.; Petitioner Exhibit 13S. The Petitioner then
“corrected” the building area in the hog building on the 3.664 acre parcel and
added an obsolescence adjustment to the buildings on both parcels. Id. According to Mr. Grabbe, his cost approach analysis
shows the properties under appeal should be valued at no more than $188,320
together. Id.
…
Here, Mr. Grabbe argues that he
is entitled to an obsolescence adjustment of 35% to the buildings on the 3.664
acre parcel and an obsolescence adjustment of 45% to the buildings on the
19.266 acre parcel because of the out-dated design of the buildings and the
obsolete manure lagoon system. For a Petitioner to show it is entitled to
receive an adjustment for obsolescence, however, the Petitioner must both
identify the causes of obsolescence it believes is present in its improvements
and also quantify the amount of obsolescence it believes should be applied to
its property. Clark v. State Bd. of Tax Comm'rs, 694 N.E.2d 1230, 1241
(Ind. Tax Ct. 1998). Thus, the Petitioner must present probative evidence that
the causes of obsolescence identified by the Petitioner are causing an actual
loss in value to its property. See Miller Structures, Inc. v. State Bd. of
Tax Comm'rs, 748 N.E.2d 943, 954 (Ind. Tax Ct. 2001). It is not sufficient
for a Petitioner to merely identify random factors that may cause the property
to be entitled to an obsolescence adjustment. See Champlin Realty Co. v.
State Bd. of Tax Comm'rs, 745 N.E.2d 928, 936 (Ind. Tax Ct. 2001). The
Petitioner must explain how those purported causes of obsolescence cause the
property's improvements to suffer an actual loss in value. Id. Here, the
Petitioner identified factors that could cause obsolescence but he only
assigned a random value to those factors. There is no evidence, for example,
that a facility with an obsolete manure storage system is worth 15% less than a
building with deep pit manure storage. Similarly, the Petitioner presented no
evidence that “quad barns” sell for 15% more than his “conventional finishing
barns.” The Board therefore finds that the Petitioner’s cost approach analysis
is too unreliable to be given any probative weight.
Further, in simply applying an
obsolescence factor to the reproduction cost determined by the assessor, the
Petitioner has merely recalculated the mass appraisal version of the cost
approach set out in the Guidelines. This the Indiana Tax Court held fails to
make a case that a property’s assessment should be changed. See Eckerling v.
Wayne Township Assessor, 841 N.E.2d 764 (Ind. Tax Ct. 2006). In Eckerling,
Judge Fisher found that it is insufficient to simply dispute the method by
which a property is assessed. A Petitioner must show through the use of
market-based evidence that the assessed value does not accurately reflect the
property’s market value-in-use. The Board is unconvinced that labeling a
Guidelines-based argument as a “cost approach valuation” is sufficient to
overcome the Tax Court’s ruling in Eckerling. See also O’Donnell v.
Department of Local Government Finance, 854 N.E.2d 90 (Ind. Tax Ct. 2006).
Finally, the Petitioner contends
that his properties are over-valued based on the sales prices of three
additional properties – two properties that the Petitioner purchased in 2008
and a third property in Carroll County that sold in 2008. Grabbe testimony;
Petitioner Exhibit 16. According to Mr. Grabbe, the subject properties’ value
is $184,311 based on a price per pig space of $42.50. Id.
…Here, the Petitioner merely testified “I’m just going to let this record speak for itself.” Id. According to Mr. Grabbe, “I compared [the other properties] as good as any appraiser has ever done.” The Petitioner, however, made no attempt to explain the deductions he made for houses, land and tool sheds on the comparable properties. “[I]t is the taxpayer's duty to walk the Indiana Board . . . through every element of the analysis.” See Indianapolis Racquet Club, Inc. v. Washington Township Assessor, 802 N.E.2d 1018, 1022 (Ind. Tax Ct. 2004). It is not the Board’s responsibility to determine how Mr. Grabbe calculated the value of other land and buildings on nearby properties. Thus, the Petitioner failed to raise a prima facie case that his properties were over-valued based on a sales comparison analysis.
Most importantly, the
Petitioner failed to show that his income approach, cost approach or sales
comparison approach valuations conformed to the Uniform Standards of
Professional Appraisal Practice (USPAP) or any other generally accepted standards.
Consequently, the Petitioner’s income approach, cost approach and sales
comparison approach calculations lack probative value in this case. See
Inland Steel Co. v. State Board of Tax Commissioners, 739 N.E.2d 201, 220
(Ind. Tax Ct. 2000) (holding that an appraiser’s opinion lacked probative value
where the appraiser failed to explain what a producer price index was, how it
was calculated or that its use as a deflator was a generally accepted appraisal
technique). Ultimately, Mr. Grabbe’s assertions may not differ significantly
from those made by a certified appraiser in an appraisal report. But the
appraiser’s assertions are backed by his education, training, and experience.
The appraiser also typically certifies that he complied with USPAP. Thus, the Board,
as the trier-of-fact, can infer that the appraiser used objective data, where
available, to quantify his adjustments. And where objective data was not
available, the Board can infer that the appraiser relied on his education,
training and experience to estimate a reliable quantification. Mr. Grabbe,
however, is not a certified appraiser; he did not establish that he has any
particular expertise in applying generally accepted appraisal principles; and
he did not certify that he complied with USPAP in performing his valuation
analysis. Moreover, Mr. Grabbe, as the owner of the property, has an interest in
the subject property’s value being lowered and therefore cannot be relied upon
to provide an unbiased assessment of the subject properties’ values. The Board
therefore will not simply defer to Mr. Grabbe’s “market observations” without
evidence showing the data upon which he grounded his observations.
